Figure 14-1 Suppose That a Firm in a Competitive Market Has the Has

question 44

Multiple Choice

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: ​
-Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

• A)above $13.
• B)less than $13 but more than $6.
• C)less than $6.
• D)exactly $13.

Understand the concept of unit elasticity and its significance in demand analysis.

Analyze demand elasticity in the context of public transportation and mass-transit systems.

Explain how the definition of a product affects its elasticity of demand.

Determine the elasticity of demand for necessities versus luxuries.

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Definitions:

Monopolistic Competitor

A market structure where many firms sell products that are similar but not identical, allowing them some power to set prices due to product differentiation.

Advertising

The activity or profession of producing advertisements for commercial products or services.

Perfect Competitors

Firms that are so numerous and small in relation to the market they serve that they have no power to alter the market price of their product, characterized by a lack of market dominance.

Economic Profit

Profit exceeding the opportunity cost of resources used, indicating a return greater than the most lucrative alternative.